TOTE, Inc. orders LNG-powered ships for Puerto Rico trade

Wednesday, December 05, 2012

TOTE, Inc., the parent company of Sea Star Line and Totem Ocean Trailer Express, said Tuesday that it will build two new 3,100-TEU containerships for the Puerto Rico trade that will be powered by liquefied natural gas (LNG) and has options to build three more for “additional domestic service.”
The announcement comes on the heels of an another made in August that TOTE plans to convert two “Orca class” roll-on/roll-off trailer ships that are used in its Alaska service so they also can be powered with LNG.
The company has an agreement to build the two new ships at the General Dynamics NASSCO shipyard in San Diego.
The company said the ships would be the first natural-gas powered containerships in the world, though like the repowered Alaska ships they will also have the ability to switch to marine diesel fuel.
“Our expectation is that unless there is a supply issue, we will be sailing all the time with LNG,” said Anthony Chiarello, president and chief executive officer of TOTE, Inc.
Because of the use of natural gas, TOTE, Inc. said the “vessels will be the most environmentally friendly containerships in the world with CO2 emissions-per-container that are 71 percent less than the vessels now in the Puerto Rican trade. Particulate matter will be reduced by 99 percent. Sulfur oxides will be reduced by 98 percent. Nitrogen oxides will be reduced by 91 percent.”
Chiarello said the investment represents a capital commitment of $350 million for the two new ships as well as additional equipment such as containers since the ships will be more than twice as large as the ones it operates today in the Puerto Rico trade. It will also fund improvements in the company’s terminals in Jacksonville, Fla., and Puerto Rico.
Chiarello said the company will seek Title XI financing for the project through the U.S. Maritime Administration.
He said the company was pleased with the price it was able to negotiate with NASSCO for the ships, and noted the company has worked with the yard previously when it built the two Orca class ships, Midnight Sun and North Star, which were built at a cost of $300 million and delivered in 2003.
He said they demonstrate the company’s “commitment to the people of Puerto Rico and our environment. These vessels mark a new age of shipping using the best technology in the world.”
The new ships will be much larger than Sea Star’s existing vessels, El Morro and El Yunque, which carry a combination of container and ro/ro cargo and were built in 1974 and 1976, respectively, and have a capacity of 1,300 TEUs each.

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In addition to the environmental benefits and increased capacity, Chiarello said shippers will benefit by the improved reliability of the ships and their ability to carry five-times as many 53-foot containers. The ships will also have more slots for 53-foot refrigerated boxes.
While the ships will not have ro/ro space, he said Sea Star believes well over 95 percent of the freight it handles today can be accommodated in containers.
Modification of the Orca class ships is expected to be completed in late 2014 or early 2015. Some of the work will be done while the ships are in port or underway, and some will be done in a shipyard.
The two new ships are expected to be completed in 2015 or 2016 and enter service between Jacksonville and Puerto Rico.
Chiarello said the enlarged size of the ships reflects the fact that the company is “building for the future.”
He also said the company did not have specific plans where those three ships would be deployed if TOTE, Inc. exercised its option to build them.
“We just felt it was important to have that added flexibility because we are looking so many years out,” he said.
"We wanted to have the option beyond the two vessels beyond the Puerto Rico trade, because we just believe there will be future opportunities whether it is in existing trades or new trades in which the ships can be deployed. But we don't have to make that decision relative to exercising the option for some time."
Chiarello said if the ships were sailing today, the fuel costs would be lower than if they burned liquid fuel, but he added it was difficult to say if the cost of fuel for the ships will be less expensive than marine diesel when they first go into service three years from now.
"Our first and foremost reason for going LNG was environmental," he said. He noted that restrictions on sulfur content of fuel in emission control areas near the U.S. coast will get increasingly stringent in future years and the company wanted to make sure the new ships have the smallest possible negative impact on the environment.
TOTE, Inc. is a wholly-owned subsidiary of Saltchuk Resources, a family-owned, Seattle-based holding company of freight transportation and petroleum distribution companies.
Other Saltchuk companies include: